Russia Might Use Japan’s Experience in Cryptocurrency Regulation

News and Analysis

Russia’s business ombudsman Boris Titov offered Elvira Nabiullina, the chairwoman of the country’s central bank, to use Japan’s experience in cryptocurrency regulation.

As reported by Vedomosti, in an official letter sent to the Central Bank’s chairwoman, he referenced Japan’s efforts to define cryptocurrencies and their exchange. Japan considers cryptocurrency an equivalent of property value that one may use as a means of payment, and to buy it from and sell it to an unlimited group of people.

Japan has also differentiated cryptocurrencies from electronic money, which have an official issuer that is entitled to decide who can use it, and how. Virtual money, on the other hand, have no issuing entity, and anyone who accepts it may use it.

In his letter, Mr. Titov described three basic provisions resulting from such regulation.

First, Japan started registering crypto-to-fiat exchange operators, which have to check transactions and customer ID, notify authorities of suspicious transactions, and store audit protocols to ensure AML measures.

Second, Japan has introduced customer / seller protection for cryptocurrency businesses. It has separated management of monetary assets and cryptocurrencies, and obliged businesses to undergo audits. Japan has also introduced complaint management procedures.

Finally, Japan exempted crypto-to-fiat exchange operations from VAT, yet retained it for the cases when cryptocurrency is used as a means of payment. In traditional transactions, the tax base is assessed on the basis of the paid out amount, however, in case of virtual currencies it will depend on the asset’s or the service’s market price.

Japan’s council for accountancy standards is also reviewing some new regulations in connection with the emergence of cryptocurrencies, however, the regulators have not yet decided what to do with revenue and corporate taxes assessed for cryptocurrency transactions.

In Russia, cryptocurrencies are not regulated. In early June 2017, Elvira Nabiullina stated that the regulator will thoroughly study their work principles before introducing any regulation. Russia’s ministry of finance, meanwhile, has stated that it will submit a report on cryptocurrency regulation to the government. The paper is likely to focus on AML measures.

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